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Light at the end of the tunnel for Thai Arbitration?

21 December 2015

Mayer Brown Legal Update

Arbitration in Thailand has not always enjoyed the support it deserves from its governments. That is not to say arbitration in Thailand is not well developed. Thailand is a contracting state to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 and has signed, but yet to ratify, the Washington Convention of 1965. To date, Thailand has signed 41 bilateral investment treaties. In terms of domestic legislation, the Thai Arbitration Act first appeared in 1987 and was amended in 2002 to incorporate and reflect the practices of modern arbitration embodied in the United Nations Commission on International Trade Law (UNCITRAL) Model Law 1985.

However, the ambit of the Thai Arbitration Act 2002 has, hitherto, been slowly eroded by successive governments. Following a series of high profile arbitrations which resulted in unfavourable awards against various government entities, the Thai cabinet issued a resolution, first in 2004, and then widened its scope in 2009, resulting in the absolute ban of arbitration in government contracts unless approved by the cabinet on a case-by-case basis (see Mayer Brown legal update, An End to Arbitration Agreements with Thai Government Entities?).

On 14 July 2015, the current cabinet passed a further resolution amending the 2009 resolution. The amendment lifted the total ban on arbitration and requiring cabinet approval for three types of contract namely: public private partnerships, concession agreements, and contracts that require the cabinet's approval under Royal Decree 2005.

Whilst the restriction on arbitration agreements in government contracts remains partly in place, the lifting of the absolute prohibition of the use of arbitration agreements in government contracts shows, to a certain extent, that the current government recognises that it is necessary to change potential investors' perceptions of arbitration and its application in Thailand. This is so that it can remain competitive with other ASEAN countries such as Singapore and Malaysia who have invested significant sums of money in establishing regional arbitration centres, and to improve its image as a destination for foreign investment.

Significant steps have been taken recently to improve the image of arbitration in Thailand. The Thailand Arbitration Center (THAC) was established last year pursuant to an act of Parliament as an alternative to the Thai Arbitration Institute. Thai courts have recently been more willing to enforce arbitration awards against government entities, all of which further demonstrates that Thailand now appears to be getting more serious about arbitration.

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